New Businesses During the Pandemic
2020 began with a bang!
With a robust economy, eager investors and unprecedented levels of venture funding, startups had near-perfect conditions to thrive. The investment community entered the year with a record $120 billion in investment capital for startups.
But as it turns out, the $120 billion capital will not be nearly enough to offset the negative impact of the financial crisis as investors are directing their investments away from high-risk and illiquid upstarts.
Startups, don’t lose heart. There is hope.
Many of the world’s most innovative and notable companies were born during the downturn and especially during the 2008–2009 financial crisis and have weathered and navigated their operations through the Great Recession. Past downturns produced some high-profile companies like Disney, General Motors, Microsoft, Hewlett-Packard, Airbnb, Slack and Uber.
Leaving your day job to pursue a dream might have seemed romantic in normal times but it is terrifying during a downturn. Having said that, new businesses are still forming despite the pandemic although at a significantly lower rate than before. Stripe reported that it handled more than $1 billion in sales for businesses that started on the platform during the pandemic.
Investment, especially venture funding, may be scarce right now but it exists, particularly for those ideas that meet the moment. To leverage on this aspect, companies should resolve to keep moving forward by adopting these widely-known and applied strategies —
1. Be a painkiller, not a vitamin.
Painkiller vs Vitamin is popular, age-old advice given by investors to startup founders across all industries. It simply means, as a company, you must recognise the most important pain point of your target audience and build solutions to alleviate that pain.
VCs and investors are now more likely to be focussed on helping the companies in their portfolio navigate the crisis rather than investing in new companies. Startups who are looking to raise funds and investors who want to fund the next big thing must cut through all that noise.
2. Seek out those who understand you.
In a typical bull market, investors would have loved to dabble outside of their comfort zone but in the current times, they will tend to stick to their areas of expertise, invest in companies where they have found success earlier or place their stock into those companies that are relevant to the ongoing times.
The relationship between your company and your investor is of the utmost importance. If you find yourself spending a lot of time pitching, don’t be let down. Hold on for that perfect fit and upgrade your research into VCs and investors by evaluating their areas of interest, their investing history and their spending in each investment round. Keep looking for that ideal match.
3. Harness free advice.
Raising money might be difficult for a while but it does not mean it’s a bad time to start a company. Startups are now at an advantage — everybody is working remotely, vast amounts of talented people are looking for work, there is relatively less competition, low-interest rates for borrowing start-up capital, and availability of cheaper equipment as businesses sell off inventory or lower lease rates as landlords scramble to fill empty spaces.
Founders must focus on gathering advice from everywhere possible, even if it comes through rejection. You might have to pitch for a 100 times before you get funded and improving your pitch each time will only increase your chances to raise money.
4. Disruption should be the keyword.
We’re slowly realising that we can’t go back to the way we were. Startups must become more adaptable and turn into learning organisations that compete not only with scale but also with speed.
Startups must avoid a bounce-back to the old ways of working and look for pain points and opportunities to develop new and sustainable business models. They must the rediscover ways of building businesses that will disrupt the status quo and take a definitive step from a crisis-ridden world to a new, much-changed and much-better world.
5. Talk to your most valuable customers.
Customer preferences and expectations are changing. Startups, while facing the customer at the forefront of their businesses, must also define best ways to resolve the conflicts of scaling businesses versus customer intimacy, routine processes versus disruptive innovations and delivery of the current business vs development of new, sustainable businesses.
It is important to remember that whatever changes we might face, positive or negative, those changes bring up new customer needs. And customer needs are at the core of any business. Determining what customers need now, rather than before the pandemic, is crucial.
The economy is already seeing increasing business trends within a few industries. Some of these business domains are here to stay even after the pandemic is over.
There is a huge demand for cashless and contactless e-commerce, delivery, sanitation, e-commerce acceleration, local shopping and sourcing and video conferencing. Robotics, technology investments, virtual events and remote work arrangements are now on everybody’s mind. There is an opportunity in offering solutions to challenges that people are now facing in educating their children, managing supply chains, getting a haircut or the house cleaned, seeing doctors and therapists and entertaining themselves.
Sustainable businesses, painkillers and customer care is the need of the hour. The times might get tougher but businesses must remember that it is not a sprint but a marathon — pandemic or not — and strive to get ahead of the curve.
For more information, check out these articles:
1. What big business ideas will emerge from the pandemic?
2. Is a pandemic the right time to start a business? It just might be.
3. How to launch a new business in a pandemic?
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